Newspapers in demand after UBS note

The silver lining for newspaper publishers in the cloud of falling circulation is likely to be a drop in newsprint prices. So predicts UBS, whose latest research note on UK paper publishers has helped their shares shoot up today.

Analysts at the investment bank believe 10% newsprint price cuts are likely in 2010. That will bring welcome relief to publishers battered by a slump in advertising and circulation. Simon Whittington and Alastair Reid at UBS comment:

"Newsprint costs represent around 15% of a newspaper publisher's cost base, and are likely to be down significantly in Europe next year due to lower demand, increased capacity, and significantly lower US prices."

They believe there will be more news on this as contracts are agreed throughout the negotiating period towards the end of this year and that market attention will focus increasingly on the issue of newsprint costs.

UBS has a "buy" recommendatin on shares in Trinity Mirror and a 160 price target. Its shares are up 20p, or 14.8%, at 155.25p in late trading.

"Despite having more than doubled in value since June, we believe there is more to go for.